Measures aimed at preventing money laundering and terrorist financing should be targeted according to the actual risk - risk management methods are emphasised in supervision

In banking activities, the greatest risk of money laundering and terrorist financing is associated with products and services that enable the entry of funds into the legitimate payment system, their custody and their rapid transfer, if necessary, across borders. In practice, therefore, a highly significant inherent risk is associated with various payment services such as cash deposits and cash withdrawals, payment accounts, money remittance, and the execution and acquisition of payment transactions. The risk related to products and services is highlighted by the fact that the risk of credit institutions engaged in deposit bank activities is higher compared to the risk of credit institutions that only offer various financial services.

The risk assessment has taken into account shortcomings, observed in connection with supervision, in credit institutions’ risk management methods, which have the effect of increasing the overall risk. It is important that measures to prevent money laundering and terrorist financing are targeted at high-risk customers and, moreover, that they do not cause unnecessary inconvenience to low-risk customers. Banks must, accordingly, have in place practices that enable them to assess the money laundering risks associated with their customer relationships and activities, to identify their customers, and to know and monitor their customers’ use of services. Assessed on the basis of the weaknesses of the services offered by the banks and the risk management methods they use, the greatest overall risk lies mainly with smaller deposit banks operating in Finland.

“In supervision, we pay special attention to the fact that banks have methods for risk classification of customers and for monitoring customers’ activities. These can be used to ensure that measures to prevent money laundering and terrorist financing are correctly targeted specifically at high-risk customers,” says Pekka Vasara, Head of Division, FIN-FSA.

The sector-specific risk assessment will guide the FIN-FSA’s prevention of money laundering and terrorist financing supervisory measures directed at credit institutions in the coming years. The assessment will be used, among other things, in the selection of inspection targets and the subjects of thematic evaluations.

“The task of risk assessment is to guide the supervisor’s work and at the same time draw supervised entities attention to the risks associated with their activities. Based on risk assessment, sanctions are not yet imposed, for example, but risk assessment helps identify areas that need to be investigated and monitored in more detail,” says Vasara.

The FIN-FSA has published a summary of its assessment of the sector-specific risks of money laundering and terrorist financing for the activities of the credit institutions under its supervision. The sector-specific risk assessment is partly based on the FIN-FSA’s specific risk assessment of money laundering and terrorist financing, which was published in April 2022.

Appendices

• Summary of risk assessment for the credit institution sector 2022 (pdf)
• FIN-FSA blog 18 August 2022 (in Finnish): Ei tule ampua tykillä kärpästä 
• FIN-FSA blog 15 December 2020 (in Finnish): Tehokas rahanpesun estäminen: riskillisistä asiakkaista kokonaan eroon vai riskien oikeasuhtaista hallintaa? 
• FIN-FSA blog 1 June 2020 (in Finnish): Rahanpesun ja terrorismin rahoittamisen riskien arviointi haaste valvojalle ja valvottaville 

* When assessing the risks of money laundering and terrorist financing, the FIN-FSA uses the following scale, which corresponds to the scale used by the EBA: Very significant - significant - moderately significant - less significant.